In our December regional report, Go Katayama, Kpler LNG Insight, explores why China’s LNG demand retreated in 2025 and what lies ahead for 2026.
The first eight months of 2025 were defined by structural recalibration across Asia’s gas markets. China, the world’s largest LNG importer, recorded a sharp 9 million t y/y drop in LNG receipts, accounting for the bulk of an approximately 10 million t decline in total Asian imports, which fell to 174 million t. This contraction, however, was not driven by a collapse in demand. Instead, it reflected a fundamental reshaping of China’s gas supply mix, one that increasingly favours cheaper pipeline imports and expanding domestic production over higher-priced spot LNG.
Regionally, a historically mild winter and well-stocked inventories suppressed incremental demand. Japan and South Korea were able to lean on stock drawdowns, while India turned to alternative fuels in its industrial sector to manage costs. Yet it was China that delivered the most meaningful signal to global gas markets with a structural and non-cyclical LNG pullback. Understanding this shift is essential to framing expectations for 2026 and beyond.
Unpacking China’s decline: It is about supply, not demand
The contraction in Chinese LNG imports cannot be attributed to a contraction in demand. In fact, total gas demand in China rose by approximately 8 billion m3 y/y, although this represented a slower growth compared to 2024. The decline in LNG receipts stemmed instead from a decisive pivot in supply sourcing.
Domestic production ramped up substantially, especially in resource-rich provinces such as Shaanxi and Sichuan, where output targets under the 14th Five-Year Plan were achieved ahead of schedule. Although production briefly dipped during the Lunar New Year holiday, output quickly rebounded in March 2025 and sustained high levels through 2Q25.
Pipeline imports also expanded. Russian flows via the Power of Siberia (PoS) pipeline approached their design capacity by the end of 1Q25, while volumes from Central Asia rose in tandem, supported by mild weather that kept regional heating needs in check. This pipeline surge effectively reduced China’s reliance on LNG, particularly as spot prices remained elevated through the winter.
At the same time, China experienced the mildest winter on record, which both limited heating needs and left storage inventories mostly untapped.
Demand side stagnation but not collapse
On the demand side, industrial gas consumption was subdued. Activity across energy-intensive, gas-consuming sectors such as cement, steel, and chemicals slowed due to macroeconomic pressures linked to imposed tariffs and weak margins.
Residential and commercial gas demand also took a hit from the mild winter and spring. Heating requirements fell well below seasonal norms, further reducing the call on LNG. In parallel, continued renewable energy capacity additions – particularly in coastal provinces like Jiangsu and Guangdong – continued to suppress gas-fired generation. The power sector leaned more heavily on wind and solar during shoulder months, eroding LNG’s competitiveness in the generation mix.
Storage and inventory dynamics: The hidden bearish driver
Storage dynamics emerged as a major, if under-discussed, driver of bearish pressure on Asian LNG prices in 1H25. With minimal drawdowns required during the mild winter, China’s LNG inventories hit all-time highs, reaching 90% full in February 2025 based on Kpler Insight estimates. By July 2025, storage was still estimated at 70% full, and such elevated storage removed the urgency to procure incremental spot cargoes. This, combined with weak industrial gas burn, significantly reduced demand-side pull and sent a strong bearish signal to the broader Asian LNG market.
Looking ahead to 2026: What could change?
China’s LNG imports are expected to rebound in 2026 – not because of weakening pipeline flows, but because the structural drivers of 2025’s import decline are already reaching their limits. Spot LNG will become increasingly competitive, and industrial gas demand is set to recover. With PoS 1 flows maxed out and Central Asian supply constrained, LNG will be needed to meet marginal demand.
Storage and weather will again play a decisive role. In 2025, both acted as headwinds for LNG. In 2026, they may become tailwinds if seasonal heating needs and drawdowns return to normal. Meanwhile, the role of Beihai and Arctic LNG 2 introduces a new layer of complexity to global supply balances.
2025 marked a strategic rebalancing of China’s gas supply system. However, the pendulum is unlikely to stay still. With pipeline imports capped, LNG prices softening, and demand poised to recover, China’s LNG buying behaviour is set to evolve again in 2026. The question for market participants is not whether China will return – but when, how much, and at what price?
Read the rest of this abridged regional report in the full issue here!